Pending home sales fell for the eighth straight month on an annual basis, according to the August report from the National Association of Realtors.
The Pending Home Sales Index dropped 1.8 percent from July’s 106.1 to 104.2 in August, and is down 2.3 percent from last August. Pending home sales in the South dropped only 0.7 percent from August to July, but contrary to the rest of the country, it is up 1.3 percent compared to last year.
“Pending home sales continued a slow drip downward, with the fourth month-over-month decline in the past five months,” Lawrence Yun, NAR chief economist, said.
Yun continues to attribute this decline in pending home sales and the overall slowdown in the housing market to low inventory and rising home prices.
“With prices having risen so quickly, many consumers were deciding to wait to list their homes hoping to see additional price and equity gains,” he said. “However, with indications that buyers are beginning to pull out, price gains are going to decelerate and potential sellers are considering that now is a good time to list and bring more properties to the market.”
And while the recent increase in mortgage rates could be a deterrent to some buyers, Yun believes that it will not have a significant impact on home sales.
“We have two opposing factors affecting the market: the negative impact of rising mortgage rates and the positive impact of continued job creation. This should lead to future homes sales staying fairly neutral,” said Yun. “As long as there is job growth, rising mortgage rates will hinder some buyers; but job creation means second or third incomes being added to households which gives consumers the financial confidence to go out and make a home purchase.”
He estimates that existing-home sales will decrease 1.6 percent to 5.46 million by the end of this year and the median existing-home price will increase 4.8 percent over all of 2018.